TA staff

Small Business: Planning and optimising your workforce

The aim of workforce planning is to align your people strategy with short-term changes and long-term goals.

TA staff

As dedicated small business accountants in London working with entrepreneurs from various sectors, we have the privilege of meeting driven small business owners to exchange ideas and share knowledge. One of the topics that crop up regularly in discussions is human resources. Specifically, how does an entrepreneur know when it is the right time to hire and how to go about planning and managing employees effectively.

Successful small business owners, we find, tend to have a workforce that can meet two objectives. Firstly, the workforce is efficiently managed to meet short-term changes which may be related to growth (hiring more staff as you get more clients), decline (having less staff as clients leave), or when there is an increase in competition (having versatile staff who can achieve more with less), to name but a few.

Secondly, smart small business owners also have a long-term plan with specific goals. The plan tells them when they need the right people with the right skills at the right time.

In essence, we view workforce planning as a systematic way to identify what skills are needed, how to find the right people for the right job, and what alternatives are available to address gaps or skill mismatches. As this is a highly fascinating subject, we look to explore it more in this article and see how workforce planning can benefit us all.

When it is time to hire

Should you hire someone because you have just received a new contract? The answer depends on the situation you are in. In general, you know it is time to hire someone when:

  • Your current workforce cannot cope with the workload or does not have the necessary skills to cope.
  • You can generate more money if you hire someone.
  • You have calculated the costs and you are certain that your business can afford it.
  • The people you hire can support your long-term business goals.

In other words, before hiring, you must understand your current workforce capacity, you are aware of any skills gap in your company, you know how to get the most out of your (current and future) employees, your decisions are guided by financial data, and most importantly, you never lose sight of your future goals.

Labour cost is an area that is worth mentioning. In the UK, employers are required to pay salaries, National Insurance and pension contributions. In addition, business owners also need to spend time and money training the person, as well as offering staff benefits like paid holidays, sick pay and gym membership, to name but a few.

Finding the right people for the right job

Every small business owner is keenly aware that hiring the right people is vital for the success of your business but finding the right people can be challenging. Here are a few good tips that may resonate with some small business owners:

Look for a team player

In many small businesses, employees are required to work cohesively on a project or several projects at once. In this case, look for a team player who is genuine, committed and supportive.

Long-term potential

Job-hopping may be on the rise but it doesn’t mean that companies like it – because turnover is disruptive and it costs money. Look for traits of commitment, particularly if the new hire is vital to your future workforce needs.

Skillset

Test the candidate to make sure they have the ability to perform the tasks required. You can test both technical and soft skills. Technical skills are related to a particular occupation. Soft skills, on the other hand, cover a wide spectrum of traits that shows how one interacts with others.

Getting the best out of your employees

Small business owners know that working longer hours does not necessarily mean more productive or increased efficiency. To get the best out of your employees, a few useful tips include:

  • Make it clear what you and the business want from them.
  • Encourage them to take responsibility for their actions; show them how their efforts are tied into the bigger picture or the overall goals of the business.
  • Create a culture that promotes honesty and strong work ethics.
  • Incentivise them when a milestone is achieved. This can be something small like taking them out for a meal or something substantial like cash bonuses.
  • Train and develop people who are keen to contribute. Show them how they can achieve career progression within your organisation.
  • Provide mentorship, particularly to young workers. Mentorship involves one-to-one discussions that focus on transferring knowledge and connecting at a deeper level.

Alternatives to address skills gaps

It is highly common for small business owners to hire new employees to address skills gaps, but alternatives such as hiring contractors and upskilling current employees should be considered too.

Hiring contractors or freelancers is definitely something that can benefit small business owners as the advantages are obvious:

  • It is usually (but not always) cheaper to hire a contractor as you don’t have to pay National Insurance, pension, and benefits.
  • Areas of expertise such as database management and cybersecurity are best left to specialists who know what they are doing (unless your business is based around these disciplines).
  • You can respond to market changes quicker by hiring or letting go of contractors with short notices.
  • Contractors have their own insurance to cover for all eventualities.

For more information, follow the link to the article Hiring specialist contractors can reduce SME costs.

Another effective way to address skills gaps is to train your existing staff. Research has shown that upskilling can improve employee job satisfaction and engagement. There are various methods to develop skills, including:

  • On-the-job training
  • Accredited or non-accredited training
  • Attending special industry events
  • Mentoring and coaching

Don’t forget payroll and benefits

Although studies have shown that employees may not be necessarily motivated by money, every employee still expects to be paid fairly, satisfactory and on time. They also look for benefits like paid holidays, gym memberships and other goodies.

While it is essential to make the pay package attractive to your employees, you also need a robust payroll team in place to calculate individual payslip and deduct PAYE, National Insurance, pension and other items like student loans, along with handling ad-hoc items like bonuses and commissions. But having an in-house payroll team is expensive – fortunately, this is where the outsourced payroll services from Tax Agility can help.

Our complete payroll services are designed for small businesses, helping small business owners like you to manage the payroll function and compliance. We can take over the entire payroll process, help with ad-hoc payroll exercises, manage TRONC Scheme Management for restaurants, bars and hotels, as well as keeping you informed of any changes to the payroll regulations.

Tax Agility promotes small businesses

At Tax Agility, we are chartered accountants specialising in small businesses across London. We’ve helped many entrepreneurs grow from a one-person business to a successful enterprise with dedicated teams in place.

Our services to small businesses in London, Putney and Richmond-upon-Thames include:

Management consultancy is an area worth mentioning if you are looking to grow your business substantially in the near future. At its core, management consultancy is about analysing the financial data of your company and allowing you to use the data to make informed decisions that spur growth.

If you would like to know more about what we can do to help your business – be it to support your bookkeeping, provide tax advice, manage your payroll services, or work with you to grow your business – get in touch by calling 020 8108 0090.

Alternatively, you can use the contact us form to get in touch.

 

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This blog is a general summary. It should not replace professional advice tailored to your specific circumstance.


How to grow your business: The human elements

Most small businesses start with an idea and not much else. As an entrepreneur starting out you have to set up everything, see through every delivery and worry about where each penny is being spent. But sooner or later the business will grow too large for you to do everything yourself, and you will need some help to bring the company forward.

A successful business is built on a strong, flexible team of staff that can face the challenges with you. This week in our “How to grow your business” series, we’re focusing on how to manage your employees to ensure that you get the best out of them.

A leader first; a friend second

There's a temptation for small business owners to want to be friends with employees, particularly in an intimate setting like a start-up. However, this will only lead to problems further down the line.

By being overly friendly with employees, you will make things difficult for yourself. You will struggle with accountability and avoid conflict because you don't want to upset your friend, even if they are actively hurting your business This is no good for you, your business or your employees.

Running a small start-up is not too dis-similar from parenthood. You're at the head of the house; it can be a loving house where the 'kids' are encouraged to succeed and where their input is valued, but ultimately it's your house, and that house goes by your rules. In a business setting, you also have a responsibility to foster the development of your employees just as a parent has the responsibility for helping their child grow. It's not about being liked all the time, but it’s about setting boundaries that are good for everyone.

Don't shy away from human resources

The acronym 'HR' doesn't exactly inspire most entrepreneurs. Some view it as yet another hat that they have to wear on their already crowded head, while others roll their eyes at such 'corporate speak' that they feel will set themselves against their small team. But here's the thing: HR doesn't need to be de-personalised, nor does it need to be adversarial. In fact, good HR should be present in every start-up because it helps to set procedures and governance.

HR starts with the hiring process. If you hire smart, you can separate out the ones that want responsibility from the ones that are counting down the hours until they can go home. If you have a team who buys into what you are doing with your start-up, then there's a good chance that they can be trusted with your responsibilities. HR can help with creating a really powerful job description that will attract people who want to work for your business, not for your money.

HR can also include training to help your team develop and grow. Team-building exercises can improve their skillset and enable them to work better with each other.

Retention is important

It’s cheaper to keep hold of existing employees than to find new ones. Recruitment is rather costly across the UK – you can spend anything from £300 on advertising costs to a few thousand pounds if you rely on an employment agency. After hiring, you need to pay national insurance, pension and equipment costs, as well as absorbing the time the new staff takes to learn and get up to speed. It can be easy to underestimate the costs, especially since they tend to go up each year, while your revenue may remain the same. If you need help with allocating your budgets to manage expenses relating to your staff, come and talk to us. We have helped many small business owners across London thrive through our small business management consulting services.

Giving your staff opportunity to grow can help to retain them. Fostering a positive environment, listening to their feedback and having constructive dialogue during one-to-one performance reviews are all things you can do to keep your employee turnover down.

Build a stable dream team

The key to effectively managing the human element of your business begins with having the right profile for the position in advance. Save yourself time, money and effort by specifying the role as clearly as you can and writing down the important attributes the person must have to fulfil the role. Don’t be afraid to look at apprentice and recent graduates either, some of them are eager to learn and be successful.

There's no doubt that the process of good hiring, training and retention techniques costs money and time, neither of which are always in abundance in many start-ups. However not following this process could cost you far more in the long run.

Business growth advice from Tax Agility

At Tax Agility, we are chartered accountants specialising in small businesses across London. We’ve helped many entrepreneurs grow from a one-person business to a successful enterprise with dedicated teams in place. If you would like to know more about what we can do to help grow your business, get in touch on 020 8108 0090 or use our Online Enquiry Form.

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employment allowance

Employment Allowance Increased by 50 Percent

Introduced in April 2014, Chancellor of the Exchequer George Osborne announced in July’s emergency (summer) Budget that the Employment Allowance is due to increase from £2,000 to £3,000 in April 2016.

This full 50 percent increase is designed to help small and medium-sized business (SME) owners to reduce the cost of their wage bill and to offset the increased costs they may start to occur due to the new mandatory National Living Wage (NLW), also to be introduced in April 2016.

employment allowanceFrom next April the Employment Allowance will allow you to take up to £3,000 off your secondary Class 1 National Insurance Contributions (NICs) throughout the year until you receive back the full £3,000, or until the tax year comes to an end. You may not roll over any unused Employment Allowance to a new tax year, and you may only claim Employment Allowance for one PAYE (Pay as You Earn) scheme.

In the same Budget the Chancellor also announced that, from April 2016, if you’re the director and sole employee of your business you will no longer be eligible to claim the Employment Allowance on your own National Insurance bill.

Exclusions

You’re eligible to receive the Employment Allowance if you’re a business or charity (including, as is often the case, community amateur sports clubs) paying employers’ Class 1 National Insurance, or you’re an individual who employs a care or support worker.

There are several exclusions however, as secondary Class 1 National Insurance Contributions are known as ‘excluded liabilities’, meaning you cannot claim Employment Allowance on them if:

  • - you’re personally employing somebody for household or domestic work, unless they’re a care or support worker,
  • - you do more than half of your work in the public sector, unless you’re a charitable organisation,
  • - you operate a service company which has only deemed payments of employment income under IR35.

How to Claim

The easiest, quickest, and arguably most efficient way to claim for the Employment Allowance is to do so through your accountant. Applying for the Employment Allowance is something your accountant will have done time and again for their clients, therefore even with the increased allowance providing a slight change to proceedings, your accountant will know how to get you started with ease.

If you don’t yet have an accountant (and you’re still looking around for the perfect pairing) you can claim for the Employment Allowance on your own behalf through your payroll software, if you have it, or by using HM Revenue and Customs (HMRC)’s Basic PAYE Tools.

Though directions will vary between different payroll softwares, the main thing you’re looking for is an option to ‘change employer details’ followed by a search for any field referencing the Employment Allowance, and a careful read of the options given to you.

Experienced Accountants

To speak with a professional accountant to discuss the new Employment Allowance, and how we help you to take advantage of it, contact us today on 020 8780 2349 or get in touch with us via our contact page to arrange a complimentary, no-obligation meeting.


Paying Tax on Employee Expenses and Benefits

Employment_TaxAgility Accountants LondonIf you’re a small to medium-sized business (SME) owner with employees, and you provide expenses or benefits to these employees outside of their regular pay, there’s a good chance that you’re required to report on these payments to HM Revenue and Customs (HMRC), paying tax and National Insurance on them where necessary.

How to Report Employee Expenses and Benefits

Employee expenses and benefits need to be submitted at the end of each tax year using form P9D or P11D, depending on the expense or benefit in question. The Government has provided a detailed list of common expenses and benefits online, clicking through to each of which will tell you which form you need, and how you should calculate what you owe.

You’ll need to submit a separate form for each employee; so if, for example, two full-time employees are provided with a mobile phone each for work, you’ll need to complete a separate P11D for each employee. If you submit a P11D you’ll also be required to submit a P11D(b), reporting what Class 1A National Insurance is due on your expenses and benefits payments. You can complete an online declaration if you didn’t submit a P11D, to ensure HMRC won’t contact you about it.

All forms should be filed through either HMRC’s PAYE Online service, your own payroll software, or by downloading the form online and posting it to the address you send your paper tax return to.

If you under-report on your employee expenses and benefits and, therefore, pay less tax than is required of you, you’ll likely be charged a penalty by HMRC if they believe your under-reporting to have been deliberate or due to carelessness. You may be asked to show evidence of how you accounted for each expense or benefit; records must be kept for three years.

PAYE Settlement Agreements

Here at Tax Agility we’ve spoken at length about PAYE Settlement Agreements in the past.

In short, if you only pay small, irregular, and impracticable expenses or benefits to your employees you can simplify your tax and National Insurance Contributions by applying to receive a PSA so you only have to make one annual payment to cover all and any payments owed.

Calculating Employee Earnings

Each employee expense or benefit will need to be calculated at a rate. The Government recommend you do this by adding the value of all expenses and benefits an employee has received over a given tax year to that of their annual salary (if they haven’t worked a full year with you, calculate the full-year equivalent of their salary and all expenses and benefits received).

Experienced Tax Accountants

To speak with a professional to discuss whether you need to start paying tax on your employee’s expenses and benefits, contact us today on 020 8780 2349 or get in touch with us via our contact page to arrange a complimentary, no-obligation meeting.


Increase in National Minimum Wage (NMW)

Tax_TaxAgility Accountants LondonYesterday Business Secretary Vince Cable announced an above-inflation increase in National Minimum Wage (NMW) rate per hour from £6.31 to £6.50.

Coming into force across the UK on 1 October 2014, the first above-inflation rise (a real-terms cash increase) since 2008 is thought to have had a helping hand from the recommendations and influence of the independent Low Pay Commission (LPC), which earlier this year called upon Mr. Cable to bring in affordable rate rises to help the more than one million lowest-paid workers across the country with their basic, everyday expenses.
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How to Make Redundancy Payments

Calculator_TaxAgility Accountants LondonIf you’re the owner of a small to medium-sized business (SME) you may be lucky enough to not have had to make a single employee (or group of employees) redundant as of yet.

This luck, however, may well change over the coming months and years, and though you’ll by no means want to place your focus on this negative train of thought, when you know the implications of such a situation ahead of it occurring, you’re better placed to deal with the consequences once you’re put in a situation that requires you to go down this path.

Selecting Employees for Redundancy

If you’re required to make an actual position (or entire operation) within your business redundant, then every employee in this position will have fairly and objectively been selected for redundancy.

If, however, only a certain number of employees within a particular position need to be made redundant (often as a response to budget cuts or a reduction in company income), the most common, objective, and fair way of selecting employees for redundancy are:

  • Self-Selection: When you ask for volunteer redundancies you can save your employees a lot of heart-ache if there are others who are happy and willing to accept redundancy at this time.
  • Last In: The last in, first out selection process is deemed fair in most industries.
  • Looking over Disciplinary Records: Another selection process that’s hard to argue against.
  • Overlooking Skills, Qualifications, and Experience: Ensuring you keep on your most skilled and experienced workers.

When selecting employees for redundancy it’s imperative that any choices you make can’t be classed as unfair dismissal.

Redundancy Payment Breakdowns

Your employee(s) will be entitled to statutory redundancy pay if they’ve been working for your company for upwards of two years. Any redundancy pay your employee receives from you won’t be taxable so long as it totals under £30,000.

Depending on how long your employee(s) has been with you, you’ll have to pay out the following:

  • Half a week’s pay for each year (full year) in which they were under the age of twenty-two.
  • One week’s pay for each year in which they were between the ages of twenty-two and forty.
  • One and a half week’s pay for each year in which they were forty-one and above.

You can calculate your employee(s) redundancy pay using this government-provided tool.

Finding Suitable Employment Alternatives

If you’re required to make an employee, or number of employees within your SME redundant, you should put some serious thought as to whether or not you can provide them with ‘suitable alternative employment’ in another area of your business, or an associated organisation.

The suitability of any employment alternatives you make to your employee(s) will be based upon the similarity of the new job compared to their previous role, the acceptability of the job’s terms, the similarity of the required skills for said job, and the rate of pay, benefits, working hours, and work location.

If your suitable employment alternative(s) are turned down by your employee(s), they may lose their right to statutory redundancy pay.

Notice Periods

You are legally contracted to give your employees the following notice periods before ending their employment through redundancy, though you may provide your employees with more than the below-stated minimums if you so wish:

  • One week’s notice for employees employed between one month and two years.
  • One week’s notice a year for employees employed between two and twelve years.
  • Twelve week’s notice for employees employed twelve years and above.

Making Redundancy Payments

To speak with a professional to discuss how to make redundancy payments and what you owe your employees, as well as the tax implications regarding any payment made over £30,000, contact us today on 020 8780 2349 or get in touch with us via our contact page to arrange a complimentary, no-obligation meeting.

 

This blog is a general summary. It should not replace professional advice tailored to your specific circumstance.

 


Overview of SMP for Employers

Family_Tax Agility Accountants LondonDealing with and understanding Statutory Maternity Leave and Statutory Maternity Pay (SMP) as a new employer or SME can be difficult, especially if you’ve never had to deal with this issue yourself as an employee at a previous company.

Though we’ll be focusing on SMP in this post, it should be noted that all new mothers have a legal entitlement to take up to twenty-six weeks off around the time of the birth of their baby, regardless of whether or not they are entitled to SMP.
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Statutory Maternity Pay (SMP) Explained

Family_Tax Agility Accountants LondonIf you’re a small to medium-sized (SME) business owner, at one point, if it hasn’t happened already, one of your employees is going to tell you they’re soon to be expecting the pitter-patter of tiny feet.

Once you’ve finished congratulating them there’s a good chance you’ll find yourself wondering what on Earth you’re supposed to do next. You’re not alone. If you don't know where to start when it comes to this area, here’s a brief overview of Statutory Maternity Pay (SMP) from the point of view of you, the employer.
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